Posts Tagged ‘Big three Bailout’

Thank Heavens the Auto Bailout failed last night, but Bush wants to use TARP money for the bailout. Last October Congress passed a bill to create TARP to bailout FINANCIAL INSTITUTIONS. The Big Three are not financial institutions, they manufacture cars. Unless the Big Three changed their business model overnight, I must assume the manufacturing companies are not in the financial industry. Any TARP money which goes to bailout Detroit would be in violation of the law you just passed. Financial Institution is defined as the following:

FINANCIAL INSTITUTION- The term ‘financial institution’ means any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company, established and regulated under the laws of the United States or any State, territory, or possession of the United States, the District of Columbia, Commonwealth of Puerto Rico, Commonwealth of Northern Mariana Islands, Guam, American Samoa, or the United States Virgin Islands, and having significant operations in the United States, but excluding any central bank of, or institution owned by, a foreign government.

“The proposal put forth by our colleagues in the Democratic majority is unworthy of American auto workers and unworthy of American taxpayers. It guarantees failure at taxpayer expense. It will keep the industry dependent on taxpayer money instead of giving auto workers the security of a viable industry that is back on its feet and ready to compete. American auto workers and taxpayers deserve better. A responsible plan should protect taxpayers and help auto workers and their families by allowing the Big Three to become competitive again. Our plan does this.”

A summary of the House Republican alternative follows and is available here:

A responsible plan should do two things: it should protect taxpayers, and it should help auto workers and their families by allowing the Big Three to become competitive again. The Democrats’ plan does neither. Congress should not be stampeded into rubber-stamping a plan that guarantees failure at the taxpayers’ expense.

The Democratic Bailout proposal has three fundamental flaws:

* The only thing crazier than trusting the same management and union officials who got the Big Three into this mess to get them out is trusting a bunch of Washington politicians and bureaucrats – the very same people who ran up a $455 billion deficit last year. American auto workers and their families deserve better.

* If no private investors believe the Big Three restructuring plans are realistic enough to support with their own money, why should we put up taxpayer money? American taxpayers deserve better.

* The Big Three restructuring plan and the Democratic proposal lack accountability. There is no guarantee that once they get taxpayer money the restructuring they promise will occur. Once the taxpayers prop them up once, there will be a big incentive to keep bailing them out – keeping the industry dependent on government aid, lashing it to the majority’s political agenda, and further denying American auto workers the security of a viable industry that is back on its feet and ready to compete. American auto workers and their families deserve better.

What We Should Be Doing: The American Automotive Reorganization and Recovery Plan

Hard Benchmarks:

On December 2, the Big Three presented to Congress their plans for restructuring. While the plans included laudable goals, too few details were provided as to how the companies will actually achieve the restructuring and the savings they have promised. In some instances new agreements to achieve the savings would not be entered into for months or perhaps years.

The Big Three must lock in the restructuring they have promised in a matter of weeks, not months or years. Congress should instead establish firm benchmarks and a tight timeline for restructuring. Such benchmarks will include for example requiring that by March 31, 2009 each company should reach agreement whereby:

* The companies’ creditors agree to a framework to reduce each company’s indebtedness by at least 1/3.

* The UAW holds to concessions already made and further:

o Concedes the elimination of Supplemental Unemployment Benefits;

o Concedes elimination of the Jobs Bank Program;

o Agrees to either reduce company retiree health care obligations or otherwise convert a portion of such obligations into equity; and

o Agrees to reduce wages and benefits to the levels paid by non-Big Three manufacturers.

Because of the many legal and contractual hurdles to restructuring, the companies are urged to accomplish their restructuring through the use of a pre-packaged bankruptcy or another mechanism to bring all stakeholders to the table for an agreed-upon determination of their future. It is important that these stakeholders reach reasonable compromises amongst themselves. Creating a government bureaucracy or a “car czar” to arbitrarily pass judgment on the thousands of details involved with a restructuring is akin to nationalizing the auto companies.

Interim Financing: Insurance, Rather than a Taxpayer-Funded Bailout

The Big Three may need some form of interim financing as they finalize their restructuring. In normal economic times, if their restructuring plan is considered viable, such financing should be available in the private market. Because of the current credit crisis, limited assistance may be appropriate in the form of insurance, rather than a taxpayer-funded government bailout that replaces private investment. This proposal ensures that taxpayers are protected and provides a powerful incentive for the Big Three to quickly implement their restructuring plans.

I hope this is not too little too late. The Senate has already planned on voting this weekend. I hope the Senate listens to this and any other alternative proposal before it passes the bill to American taxpayers for years to come. At least some Senators have their head on straight. The financial market bailout was a knee jerk reaction to a major problem. In my opinion, the Government acted too quickly before implementing their plan. We need to think beofre we act and let other innovative alternatives at least enter the conversation before giving three defunct companies any cash. The Big Three have shown they hemmorage money in unnecessary bonuses and ammenities. Here are some stats concerning the auto industry which should raise some eyebrows.

Senator Harry Reid (D-NV) has decided to delay a “Big Three” bailout plan vote until the weekend. At the same time, John Ensign (R-NV) and Senator Shelby (R-AL) are beginning to garner a lot of support for a filibuster to block the vote.

Democratic leaders toned down their prediction that Congress would approve a $15 billion automaker bailout within 48 hours, as Republican objections proved difficult to resolve.

Senate Majority Leader Harry Reid said the Senate is unlikely to vote on the measure tonight and warned that lawmakers may have to stay in session over the weekend if objections are raised to voting earlier. “Everyone should understand we’re going to work until we complete this,” Reid said.

Congressional action is likely the only chance for the aid General Motors Corp. and Chrysler LLC say they need to survive. Federal Reserve Chairman Ben S. Bernanke ruled out central bank lending to automakers and suggested options including bankruptcy reorganization.

GM and Chrysler say they need at least $14 billion in combined aid to keep from running out of cash by early next year. Ford Motor Co., which would be eligible to apply for the loans, said again yesterday it doesn’t expect to. GM and Ford shares fell.

Some Democrats said support for the bailout in is in question. “It’s not a sure thing by any means,” said Michigan Representative Sander Levin, a Democrat.

John Ensign correctly contends that further bailout will only hurt the American taxpayer. A bailout will also lessen the probability for any long term growth or prosperity in the American Auto Industry. The Las Vegas Review Journal reports:

Sen. John Ensign said this morning he may try to block the Senate from passing an auto industry bailout, criticizing the plan as a further move toward “socializing” the economy.

“We’re looking at that very hard, because I have some serious, serious problems with this package as it currently stands,” Ensign said. “Unless we see some serious give by the other side, I think that not only myself but several of us will be looking at possibly blocking this package.”

Ensign commented during an interview broadcast on CNBC, as Congress returned this week to consider an $15 billion bailout bill negotiated between Democrats and the White House. He complained the Republicans in Congress were left out of the talks.

The Nevada Republican said the assistance to the automakers amounts to “the government picking the winners and losers instead of the market.”

“We’re just going down further and further and further towards socializing our economy,” he said.

“Ensign is exactly right. This bailout will hurt taxpayers, it won’t help the economy, and it will prevent these car companies from becoming competitive. The only way for the automakers to survive is a complete restructuring that allows them to break free from the stranglehold of union bosses. If Senator Ensign insists on debate on this legislation, I’ll fully support him.”

Let Shelby know you support his idea for the filibuster, and maybe more will follow.

Could I borrow $25 Billion, once again I forgot my diamond studded wallet on my private jet? It seems that while the Big Three Auto makers were pleading for cash, their private jets were waiting for them down on the Tarmac.

The CEOs of the big three automakers flew to the nation’s capital yesterday in private luxurious jets to make their case to Washington that the auto industry is running out of cash and needs $25 billion in taxpayer money to avoid bankruptcy.

The CEOs of GM, Ford and Chrysler may have told Congress that they will likely go out of business without a bailout yet that has not stopped them from traveling in style, not even First Class is good enough.

All three CEOs – Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler – exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM’s $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.

The jets cost $20,000 just to fly to and from Washington…and you want more of my money? (Actually according to republican Congressman Knollenberg, It’s not my money…it belongs to Congress). Moreover, Ford CEO, Alan Mulally, flies to and from Detroit from Seattle every week because he did not want to relocate to Detroit upon taking his job. That is millions of dollars per year, because your CEO doesn’t want to move? Really?!?

I have an idea. First cut off all of your fat and reckless spending, then come to me begging for cash. Does no one else see how a Chapter 11 Bankruptcy filing could help this situation. I guarantee the US Trustee would not allow the use of these jets, and any other negligent spending. I bet he would force the Big Three to put the jets up for auction on ebay. Chapter 11 would actually promote the possibility of long term growth. An influx of cash would not discourage horrible fiscal policy, and in some ways validate said fiscal irresponsibility. Romney and AP are with me, why isn’t Congress?